Cities Juggle Facts, Figures, Best Guesses to Plan Spending : Communities, Like People, Must Live Within Their Means

If the 15 municipalities of the South Bay joined together in one big city, that sprawling urban entity would be the county's second largest city with 700,000 residents, 4,791 municipal employees and an operating budget of $366.4 million.

This is the composite picture that emerges from the 1987-88 budgets prepared for the region's cities.

This being budget time, the city council of this mythical municipality would be holding hearings on staff recommendations to increase the budget 5.1%--a little more than the inflation rate.

Judging by the situations in the individual cities, citizens would not be storming city hall. No wave of labor militancy would be seething. No great fiscal calamity would be threatening bankruptcy.

Juggling Act

The issues, though less dramatic, would still be enough to keep the council members involved in the increasingly complex juggling act that is municipal finance in the late 1980s.

Behind closed doors, the council would be arm-wrestling with municipal unions fighting to hold their own against cost-cutting moves.

Council members would be trying to figure out how to compensate for lost federal revenue sharing.

Keeping in mind recent shortfalls in retail trade, they would be nervously looking at estimates that retail sales will reach an expected $6.7 billion in the South Bay during the next 12 months. Balancing the budget frequently depends on the accuracy of those estimates: The state, which collects sales tax, returns a portion to cities--their largest source of state funds.

With liability insurance expensive and hard to obtain, council members would debate the size of a contingency fund to handle lawsuits.

A report from the finance department would notify the council that the city is getting closer--but still has several years to go--before reaching the limits on municipal budgets imposed by the Gann amendments.

The council would greet with relief a report that an amendment to the state Constitution that went into effect last year now protects $22.1 million in motor vehicle license fees slated for the South Bay. The money, the second largest state funding source for local governments, was raided several times in the early 1980s by the Legislature seeking to balance the state budget.

But there is no such city of South Bay, and with all its differing political, ethnic, racial and economic constituencies, there probably never will be.

Nevertheless, this somewhat fanciful sketch illustrates some common financial realities reported by municipal budget officers throughout the South Bay.

Rancho Palos Verdes Finance Director Kevin N. Smith sounded a general complaint over the loss of federal revenue sharing, which was being phased out last year and now has been eliminated.

"When you lose revenue like that, it hurts," Smith said. Rancho Palos Verdes lost $300,000 of the unrestricted funding, about 3.3% of this year's proposed budget.

Salary agreements in the South Bay this year are keeping even with inflation by and large, but making few gains beyond that, according to city officials and Vernon Watkins, area director for the American Federation of State, County and Municipal Employees.

"There is a lot of (rank-and-file) pessimism," reported Watkins, whose union represents employees in Torrance, Carson and Manhattan Beach. "It is unreasonable and untenable for an employer to say, 'Let's hold the line on everything.' Employees are subject to inflation, (too)."

In Hermosa Beach, as in most South Bay cities, liability insurance has become increasingly difficult to find and increasingly expensive.

The city joined the Independent Cities Risk Management Authority in November when private insurance companies indicated an unwillingness to continue providing coverage. In the coming fiscal year, Hermosa Beach must pay $176,539 for liability insurance to the authority, an increase of 19% over last year. Four years ago, the city paid $55,735.

If common themes unite the cities, many differences separate one from another.

Some cities are doing well this year, bolstered by the wealth of their residents, the size and activity of their shopping malls or the number of large industrial facilities paying property taxes and business license fees. Others are doing not so well.

Although the average increase in the budgets of South Bay cities was 5.1%, the variation was considerable and only Manhattan Beach and Gardena were close to the average.

Avalon, where upgrading a sewage treatment plant has boosted general fund expenditures, took the top spot with a 22% increase. Almost all the funding comes from federal grants.

Hawthorne, with a nominal decrease of 1.1%, ranked last. But the city, which is now negotiating with its unions, has up to $1 million in reserve that could go into the general fund for salaries. That would put the city into the ranks of those holding the line, where increases are less than 2%.